Union Bank invading Missouri

Union Financial Group Ltd. plans to spend nearly $8 million to launch its first banking operations on the Missouri side of the St. Louis area.

The privately held Swansea, Ill.-based company, which changed its name from Union Illinois Co. in August, is raising capital from stockholders to establish a new operation, Union Bank NA, that is expected to be based in Clayton.

The move is the latest in a series of changes that began last year after Denis O'Brien took over as president and chief executive officer from his father, Albert O'Brien. The elder O'Brien, a former vice chairman and chief financial officer at Ralston Purina Co. who bought majority control in Union Illinois in 1974, remains chairman of the $264 million company.

The bank has not decided whether it will build or purchase existing sites for the headquarters and planned branch offices, said Dennis Bielke, president and chief executive officer of Union Bank of Illinois, one of Union Financial's banking subsidiaries. Union Financial also owns the State Bank of Jerseyville.

It also has not set a firm time for the launch of the Missouri operation, as it negotiates for sites, hires staff and awaits regulatory approval. Bielke said he would remain head of Union Bank of Illinois, focusing on the Illinois marketplace.

"It's always difficult for a bank to establish a new beachhead," Bielke said. "We are expecting to strategically staff and strategically place locations that will give us a good showing."

That likely means more high-profile bankers will be in for a career switch, said J. Daniel Hogan, a St. Louis banking industry consultant.

"They'll go out and recruit a banker with a good book of business and hope if he is well-paid he can move much of that book of business over to Union Bank," Hogan said.

The move also gives Union Bank access to more lucrative markets than the Metro East communities in which it now does business.

"If you look at the total deposits within 10 miles of Clayton, 1 percent of that would be a lot more than 1 percent of the total deposits within 10 miles of their headquarters in Swansea," Hogan said.

St. Louis has been seeing an influx of new banks, in part because mergers created disruption between existing banks and their customers in some cases, and opened opportunities for competitors to grab a piece of the business.

Union Bank is the third existing bank to enter the St. Louis market this year. First National Bank of the Mid-South, a Sikeston, Mo.-based bank with $425 million in assets, has opened three branches of Montgomery First National Bank since June. Carrollton Bank, with $245 million in assets and headquarters in Carrollton, Ill., opened its Des Peres office Nov. 30 after buying a small bank in northwest Missouri in order to gain a Missouri charter.

Meanwhile, investors have raised money for two start-up banks: $6.3 million for Frontenac Bank and $9 million for Reliance Bancshares Inc.

Union Bank NA would be chartered with $7.8 million, according to a Nov. 24 application to the federal Office of the Comptroller of the Currency. In the application, Union Financial asks that the charter for Union Bank of Illinois be moved to Missouri.

"It is our impression that an out-of-state holding company attempting to charter a new bank in Missouri would run into considerable opposition from other banks, particularly the Missouri Bankers Association," Bielke said.

Max Cook, president of the Jefferson City-based Missouri Bankers Association, said the organization would not oppose anyone who has adequate capital to establish a new charter in the state.

"However, if in five years they intend on merging that bank back across state lines into their Illinois charter, leaving branches in Missouri, we would have a severe problem and would protest any such move," Cook said. He said such a move would circumvent the spirit of Missouri law regarding interstate branching.

Union Financial has been on an aggressive growth track under its president and chief executive, Denis O'Brien, 56, who spent much of his career in Europe, primarily as chairman of EuroAtlantic, a worldwide corporate finance firm.

O'Brien also was business manager for ex-Beatle George Harrison, who accused O'Brien of fraud and mismanagement in a 1995 lawsuit. Harrison won a $10.9 million judgment against O'Brien the following year. A Los Angeles court rejected O'Brien's appeal in February.

Since O'Brien began running Union Financial, the company bought a consumer loan firm; added high-profile business leaders including Ralcorp Holdings' Joe Micheletto and Korte Construction Co.'s Ralph Korte to the board of directors; and agreed to spend more than $1 million to double the size of its Swansea headquarters.

The company posted nearly $2 million in net income in the first nine months of the year -- $1.2 million from State Bank of Jerseyville and $779,000 from Union Bank of Illinois.